The view of the European Association of Corporate Treasurers on the maximum number of characters in the remittance information, carried with a
Credit Transfer transaction

The introduction of harmonised Single Euro Payments Area (
) payment schemes holds a lot of promise for corporates. The corporate community expects, among other things, improved automatic reconciliation of credit transfers with outstanding payments in account receivables. In the pre-
euro payments market, the ability of treasury and accounting systems to automatically reconcile incoming payments is seriously hampered by the following factors:

Lack of standard structure of the remittance information.

Limited space in payment messages.

No guarantee that original remittance information is not modified by clearing and settlement mechanisms (CSMs) or the receiving payment service provider.

Inability to automatically recognise the sender by a code.

Different ways of payment reporting in the European Union (
) Member States.

The roll out of the ISO 20022 message standards developed by the International Organization for Standardization (ISO) partially solved these problems by offering unlimited space in the remittance information carried with credit transfers and a standard structure of the remittance information. The European Association of Corporate Treasurers (EACT) notes that the
Credit Transfer (
) Scheme does not however, take into account some of the options and variations possible within the ISO 20022 message standards.

The
Scheme permits the end-to-end carrying of remittance data on a structured or unstructured basis. The scheme rules allow for up to 140 characters to be included with the remittance information. Payment service providers are obliged to pass on the full remittance information through the payment processing chain. The European Payments Council's (
) rationale underlying these provisions is set out in the information box above.

According to the EACT, the provisions of the
Scheme on remittance information fall short of corporate expectations with regard to improved automatic reconciliation of credit transfers in
. The limitation to 140 characters in the
Scheme may be appropriate with regard to the majority of retail payments, however is problematic for many industries in the area of business to business (B2B) payments in instances where debtors settle multiple invoices at any given time. Using the 140 characters in a structured form only allows one invoice to be listed at a time and does not provide for the possibility to list an invoice and a credit note. The current provisions on the remittance information in the
Scheme mean that corporates have to continue existing practice; i.e. separate the remittance advice from the payment. With the introduction of the ISO 20022 message standards and the
payment schemes, corporates had however hoped to be able to combine both the remittance advice and the payment therefore simplifying reconciliation.

The EACT has repeatedly proposed to modify the
Scheme to extend the remittance information to a multiple of 140 characters. Using the standard ISO 20022 syntax, this would enable corporates to list more than one invoice with the remittance information. To date, no decision has been taken to amend the
Rulebook in line with the EACT requests. Only the Finnish banking community introduced an additional optional service1 (AOS) to extend the 140-character remittance field by adding nine repetitions of 280 characters. For more information on AOS, refer to 'related links' below.

EACT standard for unstructured remittance information

The EACT maintains that remittance information should be transported in a structured form. As pointed out above, the
Scheme however permits the end-to-end carrying of remittance data either on a structured or unstructured basis. As proposed by the
, the EACT has developed a standard for formatting the contents of the unstructured remittance information, which is referenced in the
Rulebook versions 5.1 and 6.0. The EACT standard specifies the elements enabling the automated payments processing between business partners. Consequently, the EACT standard allows corporates to make better use of the 140 characters which can be transported with the
remittance information.

The EACT standard is inspired by the 'language' used by SWIFT (Society for Worldwide Interbank Financial Telecommunication) in relevant text fields, i.e. a non XML, easily readable syntax which optimises the use of space and fits multiple invoice references. The EACT formatting rules cater to those corporates which normally, or occasionally, make payments settling multiple invoices and who do not wish to have a different procedure for those cases. It has to be kept in mind however, that the EACT standard does not solve the problem of suppliers to large retailers who get paid hundreds of invoices every fifteen days. These suppliers still need to use a separate 'remittance advice', cross referenced to the payment. Suppliers will have to continue to do so until retailers adopt a 'standard syntax' which could be handled by enterprise resource planning (ERP) systems and treasury software. Such a standard syntax however is not likely to materialise in the near future.

For the EACT formatting rules to work in practice, the following needs to happen:

ERP vendors or their software partners extract relevant remittance information from their database and master tables and populate the 140 character remittance field according to EACT rules. This should be available in all payment formats, i.e. ISO or non-ISO based formats, made available by payment service providers in the
Member States offering
services. Conversely, on the side of the receiver, the ERP and treasury systems know how to read the field from payment service providers' account statement files. Major ERP systems can easily and inexpensively be adapted to create and read EACT formatting rules.

Supplier and buyer agree to use the EACT formatting rules.

Payment service providers offering
services and CSMs, subject to the Payment Services Directive, transport the content of the remittance field formatted according to the EACT rules unaltered through the processing chain without checks and report the content of the structured remittance information in full.

For more detailed technical information on the EACT standard, refer to the 'related links' below.

According to the EACT, this standard for unstructured remittance information should however not be regarded as a final solution to the problem on how to reference multiple invoices in a payment and improve automatic reconciliation. The standard provides a temporary solution yet eventually the EACT advocates developing a standard solution for structured remittance information in line with an AOS offered by the Finnish banking community.

Proposals by the EACT aimed at improving automatic reconciliation which are outside of the scope of the

In addition to extending the number of characters which can be included with the remittance information and developing a standard format for structured remittance information, the EACT maintains that optimising automatic reconciliation requires the adoption of a Unique Entity Identifier (UEI) for each corporate in the
. The EACT proposes to conduct a related feasibility study based on value added tax codes. Currently there is no global standard for a UEI. Finding a global entity identifier is not in the scope of the
, however the
indicated that once a solution exists, the
will reconsider this issue.

Last but not least, the EACT proposes that corporates paying multiple invoices at the same time should adopt a standard remittance advice received through the same banking channel in the same ISO format as the payment. This item is in a first step addressed in the corporate community.

Gianfranco Tabasso is the Chairman of the EACT Payment Commission and represents the EACT in the
Customer Stakeholders Forum (CSF). The CSF specifically addresses the requirements of payment service users with regard to the
and
Schemes. CSF members represent a wide cross-section of interest groups acting at the European level including consumers, corporates and small and medium sized enterprises. The CSF is co-chaired by a customer representative and the
Chair.

Comments or questions with regard to the EACT standard can be posted in this
forum on the EACT Website. At the end of each month, experts will gather all comments posted and prepare collective or individual answers. Visitors to the EACT
forum are also encouraged to initiate discussions and to comment or respond to questions posted by others.

1 The
Schemes recognise that individual scheme participants and communities of participants will provide complementary services based on the scheme so as to meet further specific customer expectations. These are described as additional optional services (AOS). Scheme participants are payment service providers which have formally adhered to the
Schemes.

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In this article

The process of developing the
Credit Transfer (
) and
Direct Debit (
) Schemes is an example of European Union (
) integration in action, of which there is broad agreement that the introduction of harmonised
payment schemes generates tangible benefits for market participants. Forging consensus on the countless technical and procedural details which make up a European payment scheme however, requires bridging different payment practices and customer expectations across the 32
countries. To give an example: according to the
Rulebook, up to 140 characters can be carried with the remittance information. The European Payments Council's (
) rationale underlying the provisions in the scheme rulebooks with regard to remittance information is set out in this article. Gianfranco Tabasso, Chairman of the European Association of Corporate Treasurers (EACT) Payment Commission and EACT representative in the
Customer Stakeholders Forum, advocates modifying the rulebook to allow for a multiple of 140 characters to be included in the remittance information. In this article, he also outlines the EACT standard for unstructured remittance information. Readers are invited to join the debate: the number of characters in the remittance information is also subject of this year's three month public consultation on the evolution of the
Schemes launched on 16 May 2012. The link to the documentation related to the 2012 public consultation on the evolution of the
and
Schemes is included with this article. All stakeholders are encouraged to provide feedback by 13 August 2012.

Key Information in this Article

The
Credit Transfer (
) Scheme permits the end-to-end carrying of remittance data on a structured or unstructured basis. The scheme rules allow for up to 140 characters to be included with the remittance information. Payment service providers are obliged to pass on the full remittance information unaltered through the payment processing chain. The European Payments Council’s rationale underlying these provisions in the
Rulebook is set out in the information box below.

The European Association of Corporate Treasurers (EACT) advocates extending the number of characters to be carried with the remittance information to a multiple of 140 characters. This would improve automatic reconciliation of outstanding payments in account receivables.

The EACT developed a standard for formatting the contents of the unstructured remittance information, which is referenced in the
Rulebook. The EACT standard specifies the elements enabling the automated payments processing between business partners. According to the EACT, this standard should be regarded as a temporary solution, given that the EACT would prefer that remittance information is always carried in a standard structured form.

The European Payments Council’s Rationale Underlying Provisions in the
Scheme Rulebooks with Regard to Remittance Information

The provisions in the scheme rulebooks on the number of characters to be included with the remittance information are based on the following considerations of the European Payments Council (
):

It is standard practice throughout Europe and in many other parts of the world for all processing chains to allow for 140 characters in the remittance data field. Experience shows that over 95 percent of credit transfers can be validly reconciled with less than 140 characters of remittance information.

The annual public consultations carried out by the
on the evolution of the
payment schemes to date have not identified support by a broad majority of all market participants for an extended number of characters to be carried with the remittance information.

Allowing for up to 1000 characters in
would force European payment service providers and corporates to maintain different processing applications and IT systems for
and non-
transactions. The
therefore recommends keeping the remittance information at 140 characters to ensure full remittance information is processed end-to-end through the different account information channels for mass payments.

The
believes that it is not feasible to incorporate this change into the scheme at this stage in the migration process. It should be kept in mind that all market participants in the euro area are required to meet the 1 February 2014 deadline for compliance with core provisions of the ‘Regulation (
) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009’. This means that systems and operations have already been aligned or are being aligned with, among other things, the current standard 140 character remittance information. Introducing such a significant change at this stage; i.e. extending the number of characters carried with the remittance information, would require all market participants (i.e. payers, payees, payment service providers, payment service users and clearing and settlement mechanisms) to make further significant investments in their IT systems, rendering previous developments obsolete.

The
would welcome discussing with all stakeholders any other needs going forward based on an impact and cost-benefit analysis and considering various options to further improve automatic reconciliation including options not related to the number of characters included in the remittance information.

Readers are invited to join the debate on the number of characters which can be included with the remittance information when making a
payment and other suggestions for possible changes to the
Schemes.

The link to the documentation related to the 2012 public consultation on the evolution of the
Credit Transfer and
Direct Debit Schemes is included with the ‘related links’ below. Stakeholders are encouraged to provide feedback by 13 August 2012.